Lunar New Year skews January freight traffic

Update 20 February: Two more of the big Asian cargo players have reported their January results. Full details below, but briefly, Both Cathay Pacific Airways, and Singapore’s Changi Airport reported modest year-over-year growth.

Update 19 February: The third of China’s big three carriers, Air China, reported January cargo traffic up 17%. Also, Abu Dhabi-based Etihad Airways reported its January cargo volume up 27% to 32,600 tonnes. The carrier said the increase was “driven largely by increased demand into and out of China and India.” Etihad also said it expected 2013 to be another record year for cargo — further illustrating the shift of freight from the traditional Asian and European carriers to carriers from the Gulf region.

Update 18 February: Two of China’s big three combination carriers have now reported their January results, and, as expected, they show huge year-over-year gains. However, as we point out below, this will have been heavily influenced by the timing of the Lunar New Year holiday and a meaningful look at their cargo traffic will not be possible until the February results are in. Singapore Airlines also reported its first y-o-y gain in almost a year.

It is often convenient to use Hong Kong Air Cargo Terminals as bellwether for the entire air cargo industry. Hactl has long been the busiest handler at the world’s busiest cargo airport, and while individual carriers and airports may report mixed up and down results in any given month, one could usually look at Hactl’s handle as an indicator of the overall health of the industry. But when you look at Hactl’s January statistics (below, and in the chart at right) and see a 22% year-over-year jump, do not draw the usual conclusions.

Why not? Because the timing of the Lunar New Year holiday in Asia, particularly in China, can make year-over-year comparisons for the months of January and February completely meaningless. The current situation is a perfect example: In 2012, the New Year holiday fell in January, which meant that many factories in China were closed for a full week, producing nothing that could be shipped. This meant that Chinese carriers and airports reported fairly weak cargo volumes. But when the factories reopened, they pumped out their products at a high rate to make up for the lost week, which meant that cargo volumes surged in February. Fast forward to 2013, and you find the opposite situation. The New Year holiday fell in early February, so output was increased in January, and shippers moved as much as they could in January to ensure that inventories were sufficient to cope with the shutdown in February. The result, needless to say, is that year-over-year comparisons show a huge jump in January, and will undoubtedly show a big drop in February.

As I write this on 15 February, we still have not seen January data from any of the big Asian carriers (a delay probably attributable to the New Year holiday). But given the big year-over-year jumps reported by Hactl and Pactl, we expect to see reasonably strong gains from Cathay Pacific and the big three Chinese carriers, and possibly Singapore Airlines, as well. We will update this report next week as those data become available. But for the carriers and airports in most of the rest of the world, January was not a particularly good month, with most reporting mid-single-digit losses.

The big exception, though, is the Middle East. Turkish Airlines (which straddles the divide between Europe and the Middle East) reported a 22% year-over-year gain. And while we haven’t yet seen reports of January data from the Gulf region, anecdotal evidence indicates that carriers and airports there will continue to report strong gains.

On that subject, we note that Dubai Airports, which operates both Dubai International (DXB) and the new Dubai World Central (DWC) Airports has just reported its full year 2012 cargo handle up 9.4%. This provides clear evidence of a major shift in world air freight flows. In a year in which IATA reported that total international air freight traffic fell 1.9%, carriers from the Middle east reported their traffic up 14.9%. We do not yet have 2012 freight data from the airports in Abu Dhabi, Doha, and Jeddah, nor from any of the big Middle East carriers, but we suspect they would all show dramatic increases – higher than the 9.4% posted by DXB/DWC. Carriers from the Gulf region (Emirates, Etihad Airways, Qatar Airways, and Saudia), have aggressively pursued cargo volume in recent years, and while they do not operate big freighter fleets, their huge fleets of cargo-friendly passenger widebodies (like the 777-300ER and the A330 Family), and their vast networks have enabled them to achieve double-digit gains in freight traffic while the traditional big players post declines. One veteran industry observer recently summed up the situation for the big European and Asian carriers this way: “You have no idea how bad it is regarding demand and supply. The Gulf carriers are mopping up every kilo with pax aircraft going everywhere.”

And on that cheery note, we look at January cargo data from individual carriers and airports:

Asia Pacific

Hong Kong Air Cargo Terminals (Hactl, which handles over 70% of the cargo at Hong Kong International) reported its January handle up 21.8% y-o-y to 228,000 tonnes. While this might appear to be an astonishing jump in cargo volume, we point out that the Lunar New Year holiday fell in January in 2012 but in February in 2013. So, with factories closed for a week in January 2012, volume was considerably below normal, whereas this year shippers were pushing out extra volume in January because they would be closing their factories for a week in early February. The true measure of air freight demand at HKG in early 2013 will not be known until February’s results are reported. But for whatever it is worth, January export volume was up 18.9% to 116,000 tonnes, import volume was up 19.9% to 55,000 tonnes, and the increasingly import category of transshipment volumes jumped 29.9% to 58,000 tonnes.

Cathay Pacific Airways reported January cargo traffic up 7.7% y-o-y to 724 million RTKs. Cargo volume for the month was up 14.2% to 133,000 tonnes, indicating the regional demand grew more strongly than long-haul. The carrier’s General Manager Cargo Sales & Marketing James Woodrow said: “Demand was generally quite robust out of our key Hong Kong and Mainland China markets in January, though we didn’t see any significant pre-Chinese New Year rush as in previous years.” Whether or not the January gain was boosted by the timeing of the New Year holiday will not be known until February results are in and we can compare the 2013 January/February total to the same two-month period in 2012. Mr. Woodrow also pointed to continued economic weakness in Europe, and said Cathay had reduced its freighter schedule on the Asia-Europe lane. Regarding the freighter fleet, he said that Cathay would park another 747-400BCF before the end of February.

Shanghai-based China Eastern Airlines reported January cargo traffic up 21.8% y-o-y to 380 million RTKs as both international and domestic traffic fell by similar amounts. International traffic rose 18.7% to 284 million RTKs, domestic traffic rose 30.5% to 86 million RTKs, and the much smaller regional traffic (Hong Kong and Macaul) jumped 50.0% to 11 million RTKs.

Guangzhou-based China Southern Airlines reported January cargo traffic up 41.9% y-o-y to 359 million RTKs, with international, domestic, and regional all up by similar percentages (42.4%, 40.9%, and 51.3%, respectively).

Beijing-based Air China reported January cargo traffic up 17.0% y-o-y to 335 million RTKs. The gain was driven by increases in both international traffic (up 7.3% to 238 million RTKs) and domestic traffic (up 53.9% to 91 million RTKs).

Shanghai Pudong International Airport Cargo Terminals Co. Ltd (Pactl, the biggest cargo handler at PVG) reported its January handle 17.4% y-o-y to 96,000 tonnes – but the caveat regarding the Lunar New Year holiday applies to Pactl, just as it does to Hactl. International volume was up 14.4% for the month to 96,000 tonnes, while the much smaller domestic volume was up 59.8% to 9,000 tonnes (most of Shanghai’s domestic cargo moves through nearby Hongqiao Airport).

Singapore Airlines reversed a long trend of year-over-year declines in demand, reporting January traffic up 3.0% to 512 million RTKs. The carrier said some of this increase was due to increased demand for perishables for the Lunar New Year holiday.

Singapore’s Changi Airport reported its January freight handle up 2.7% y-o-y to 140,000 tonnes. The airport said the increase came “as air shipments picked up ahead of the Lunar New Year period.”

Europe & Middle East

Lufthansa Cargo reported its January traffic down 5.4% y-o-y to 583 million RTKs, continuing the trend of mid-to-high single-digit declines reported throughout 2012. For the Lufthansa Group as a whole, January cargo traffic was down 3.2% to 702 million RTKs reflecting the impact of strong growth (9.6%) at subsidiary SWISS.

Air France-KLM reported January cargo traffic down 2.9% y-o-y to 779 million RTKs. As has been the case for much of the last year, the biggest decline was on the Asia-Pacific trade lane, which was down 5.6% to 287 million RTKs. Traffic to/from the Americas was down 1.8% to 327 million RTKs. While these results show that Air France is continuing to suffer declining cargo traffic, the rate of decline has slowed somewhat.

International Airlines Group (IAG, parent of British Airways and Iberia) reported January cargo traffic down 7.7% y-o-y to 431 million RTKs. As has been the case since the BA/Iberia merger, the monthly decline hides a considerable difference in the performance of the two carriers. BA’s cargo traffic in January was down 5.2% to 396 million RTKs – a bad enough result – but Iberia, which has been reporting low-double digit declines for some time, saw things get even worse as cargo traffic fell 17.0% in January to just 83 million RTKs.

Turkish Airlines continued to report strong results, with January cargo volume up 21.8% y-o-y to 36,000 tonnes. Given that Turkish reported year-over-year growth of between 20% and 35% in most months of 2012, it seems likely that this January volume was not inflated by the placement of the Lunar New Year holiday in Asia.

Frankfurt Airport (FRA) reported its January freight handle up 1.5% y-o-y to 143,000 tonnes. This is the third consecutive month in which FRA has reported small gains, following seventeen straight months of decline. While those declines can be partly attributed to the deteriorated economic situation in the eurozone, the imposition of a ban on night flights at FRA has also played a role. And while any increase is welcome, we point out that FRA’s handle in January 2013 is lower than all but two of the last six years, and 4% below what it was in January 2007.

London’s Heathrow Airport (LHR) reported its January handle down 5.3% y-o-y to 106,000 tonnes. Through the last half of 2012 LHR reported some low-single-digit declines and some low-single-digit gains, so the January 2013 result is a bigger swing into negative territory than the airport has seen recently.

Americas

LATAM Airlines Group (parent of LAN and TAM), reported December cargo traffic down 1.1% y-o-y to 347 million RTKs. The company said the decrease in traffic was the result of continued weakness in imports into Latin America.

United Airlines reported January cargo traffic down 11.8% y-o-y to 248 million RTKs.

Delta Air Lines reported January cargo traffic up 0.5% y-o-y to 256 million RTKs.

American Airlines reported January cargo traffic up down 9.3% y-o-y to 180 million RTKs.